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Assuming he's profitable now, lock-in his salary at what he's currently making and give him a generous profit share for everything he makes from this day forward. Realistic, stepping goals are fine. (ie 10% for the first 5k in new profits and 25% thereafter) He needs the security of his current paycheck and the motivation that all his future (and hopefully generous earnings) are all up to him. And when shit changes and what he's doing is no longer as profitable, it's up to him to figure out how to continue to make himself a worthwhile contributor.
Also, make sure your employee fits the right profile, some people just want a steady paycheck and can't really be motivated with extra money. I find season's ski passes, engaging and interesting work, flexible schedules, opportunities to contribute thoughts and ideas, paid vacations and just making people feel part of the family are also huge contributors to morale and motivation.
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HIGH QUALITY ADULT AND NON-ADULT DESIGN/MARKETING WORK SINCE 1997!!
Yan - ICQ # 4790444 - Phone: 530-544-7058
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